By Ananya Mariam Rajesh
(Reuters) -Cosmetics giant Estee Lauder forecast a bigger-than-expected drop in fiscal 2025 sales on Thursday, signaling a slowdown in demand for beauty products in the American market and a longer road to recovery in the key China region.
Estee has been struggling to revive sales at airports and tourist hubs in China and other major Asian markets as consumer sentiment in the region remains weak due to high unemployment rates. Asia-Pacific, which includes China, contributed 31.3% of the company’s total sales in fiscal 2024.
Its sales have also been soft in the U.S., with the company now facing challenges from President Donald Trump’s chaotic implementation of tariffs.
Estee had pulled its annual forecast in October, citing an uncertain recovery in China, before Stephane de La Faverie took over as CEO.
His turnaround plans for the company include speeding up of new launches and bringing in new luxury price tiers. But that might face a roadblock from growing economic uncertainties due to the trade war.
Organic net sales in the Americas fell 5% on retail softness and decline in consumer confidence and sentiment.
“From a regional perspective, the Americas had the largest miss and EMEA (Europe, Middle East and Africa) was only slightly softer … Outperformance on margins show the progress of EL’s PRGP (profit recovery plan) and restructuring activities,” RBC Capital Markets analyst Nik Modi said in a note.
European peer L’Oreal has also flagged weakness in the U.S., while it continues to see strong demand for its creams and perfume in Europe.
Estee expects fiscal 2025 net sales to be down 8% to 9%, compared with analysts’ estimate of a 7.07% fall, according to data compiled by LSEG.
The company forecasts annual adjusted per-share profit to be between $1.30 and $1.55, with midpoint above the estimate of $1.40, as it starts to benefit from its restructuring plan, including job cuts.
Shares of the MAC lipstick maker were down nearly 1%.
MITIGATING TARIFFS
Estee aims to return to sales growth in fiscal 2026, its CEO said, adding that this depends on the resolution of the recently enacted tariffs to mitigate potential negative impacts.
The U.S. has imposed 145% tariffs on China, while Beijing put a 125% levy on American imports into the country.
To navigate the tariff situation, Estee expects to reduce imports into China from the U.S. to 10% from 25%.
Estee said about a quarter of products imported into EMEA are sourced from the U.S., but it is working to change to regionalized and third-party manufacturing networks.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Shilpi Majumdar)
